* Cyprus says it talking to Russia at "political level" on
* Russian deputy minister says no formal request
* Cash-strapped island needs 1.8 bln by next week for bank
NICOSIA, June 21 Cyprus has approached Russia on
a political level to secure desperately needed funding to bail
out its second-largest bank, a senior Cypriot source said on
Thursday, after a Russian official said no formal request for
aid had been made.
Cash-strapped Cyprus needs the equivalent of 10 percent of
its GDP to recapitalise its second-largest bank by June 30, with
its financing options including a European Union bailout, a
Russian loan or a combination of the two.
"A political approach was made (to Russia), and we are
expecting a response," the Cypriot official told Reuters on
condition of anonymity.
Russian Deputy Finance Minister Sergei Storchak told
reporters earlier that Russia had not received any request for
financial help from Cyprus, which hosts hundreds of Russian
firms and banks. He later said any bid would be considered.
"If they approach us, we will look into it. I have not yet
seen them approach us, there is only talk in newspapers,"
Storchak told journalists on the sidelines of an economic forum
in St Petersburg.
Storchak signed off on a 2.5 billion euro bilateral Russian
loan to Cyprus last December.
But Cypriot officials said the issue was still open.
"An application has been made, no doubt about it," the
Cypriot official said, declining to comment further.
Local media say Cyprus's contacts with Russia are directed
by President Demetris Christofias, a Russian-educated politician
who is the only communist head of state in the EU.
Cyprus, with a GDP worth about 17.5 billion euros, must find
1.8 billion euros - cash it doesn't have - to recapitalise
lender Cyprus Popular by the end of next week.
It has appeared reluctant to borrow from the EU bailout
fund, the EFSF, for fear of strings attached and potentially
unpopular fiscal austerity eight months before a general
election. However it has not ruled that option out.
Popular took a heavy 2.3 billion euro loss on the write-down
in the value of Greek bonds in its portfolio, depleting its
regulatory capital. Unless it finds the funds privately, the
state must step in.
Cyprus was shut out of international capital markets when
yields on its benchmark bonds climbed to unaffordable levels in
May 2011. The yield on its 10 year benchmark
was quoted at 15.86 percent on Thursday.